NFL Cheerleaders are suing for a Livable Wage for their 300 Hours of Annual Work

Posted by PITHOCRATES - April 26th, 2014

Week in Review

If you were in the ‘in’ crowd in high school the most ‘in’ people were the quarterback of the football team and the head cheerleader.  Typically the best looking guy and girl in high school.  This is why girls want to be cheerleaders.  Because only pretty and popular girls are cheerleaders.  These girls don’t get paid.  And that’s okay.  Because they do it for the privilege of wearing that cheerleader uniform.  And being part of the ‘in’ crowd.

There’s a fascination with cheerleaders.  Men like them so much they made a porno movie about a girl trying to make a football cheerleader squad that wasn’t the Dallas Cowboy cheerleaders but looked like it was.  Debbie Does Dallas.  A porn bestselling video.  Because men like cheerleaders.  For they are toned, fit and beautiful.  And they wear revealing outfits.  Which is why NFL cheerleaders are sexy.

Women try hard to become NFL cheerleaders.  But only toned, fit and beautiful women get to be cheerleaders.  Which is why women work so hard to be toned, fit and beautiful.  So they can go to cheerleader tryouts and best the competition.  To win that honor of wearing an NFL cheerleader uniform.  At least, that’s how it has been until now (see String of Cheerleader Lawsuits the Next Headache for the NFL by Tierney Sneed posted 4/25/2014 on US News and World Report).

What will become of the Buffalo Jills, the cheerleaders that are on the sidelines for Buffalo Bills games? A lawsuit alleging lower than minimum wage earnings and other New York labor law violations filed by five former Buffalo Jills has caused the suspension of the squad, and taken with a pair of similar suits, is creating yet another public relations cloud over the National Football League.

Stephanie Mateczun – president of Stejon Productions Corp., the third-party production company that manages the Jills and was named in the suit alongside the team – confirmed the organization’s activities had ceased indefinitely as a result of the lawsuit, filed in New York Supreme Court Tuesday…

The Jills’ lawsuit is the third case to be brought up by an NFL team’s cheerleaders against their respective organization this year. Each case – the first, a class action suit filed in January against the Oakland Raiders, and the second, launched in February by a Ben-Gals cheerleader against the Cincinnati Bengals – is unique in its specifics…

The string of cases, as well as leaked copies of cheerleader handbooks from other teams, suggest the alleged mistreatment of cheerleaders is a league-wide problem. They are often paid per game, with hours spent practicing or at off-field events left uncompensated. They are also held to standards unthinkable in most workplaces: regular weigh-ins, costly requirements for certain hair and beauty treatments, and restrictions on who they date and what they post to social media…

Similar claims were made in the next suit to follow, filed by Ben-Gals’ cheerleader Alexa Brenneman against the Bengals in February. It suggests she made less than $2.85 an hour for her 300 hours of work during the season, well below Ohio’s $7.85 an hour minimum wage. The Jills suit likewise describes an alleged violation of New York minimum wage laws, and also details what it calls “demeaning and degrading treatment” at Jills events where the cheerleaders supposedly faced “lecherous stares,” “degrading sexual comments” and “inappropriate touching…”

“The issue here is … how we treat our workers in this country,” Dolce, of the Jills case, says – which is why he thinks the NFL should be paying attention as well. “I know it’s not a central issue for the NFL, but in terms of worker rights and human rights and gender politics, it shouldn’t just be ignored…”

The controversy isn’t sitting well with the NFL’s current  marketing outreach to female fans. A Change.org petition launched before the lawsuits were filed demands teams across the league provide their cheerleaders with livable salaries – and it has more than 100,000 signatures.

Livable salaries?  Cheerleading is not a job.  It’s a thing to do for fun.  That thing these women may enjoy unlike their day job.  Which provides their livable salaries.  Not their cheerleader earnings.  I mean, who can work only 300 hours a year and expect to pay all of their bills?

Cheerleading can’t be that horrible.  Because women go to cheerleader tryouts to make the squad.  And abide by all the rules to remain a cheerleader.  If it was so horrible they wouldn’t do this.  But they do.  And they’re not doing this for the money.  For we know they don’t make any money being a cheerleader.  No.  They do this because they love it.

You know who’s happy now?  Teams that don’t have cheerleaders.  And if they were considering adding them you can bet they won’t now.  In fact, those teams that do may consider dropping theirs.  For here’s a startling fact.  Cheerleaders don’t win games.  The only time most people even see them is coming out of a commercial break.  Then they’re gone.  As the football game fills widescreen televisions across the country.  They are trying to use cheerleaders to make the stadium experience special as a lot of people these days prefer watching football at home on their widescreen televisions.  Making it harder to sell out some home games.  But it is doubtful people are going to buy tickets for a game because they may be able to talk to a cheerleader.  No matter how pretty or sexy they are.  Because people love football more.

Teams may make some money with their cheerleaders.  But it’s probably not enough to justify these legal headaches.  So NFL cheerleaders may soon be a thing of the past.  Something most football fans probably won’t even notice.  For few in a big stadium can even see them.  And those watching on television may catch a glimpse of them but that’s not why they’re tuning in.  No, the people who will most notice the passing of the NFL cheerleader are the cheerleaders.  And the women who wanted to try out to become a cheerleader.  Something they may have dreamed about since high school.

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Only about 3% of All Workers at any one time make the Minimum Wage

Posted by PITHOCRATES - April 24th, 2014

Week in Review

If you’ve heard the left talk about the urgent need to raise the minimum wage you would think half the nation is languishing under pauper’s wages.  While rich business owners are lighting their cigars with twenty dollar bills.  As they rest their feet on the back of a minimum wage worker.  But it’s not quite that bad (see The Cost of the Minimum Wage: $20 for a Burger posted 4/24/2014 on E21).

McDonald’s high turnover rate shows that most of its workers are using the job as a stepping stone to other careers or as a transition position between jobs. One in every eight U.S. workers has been a member of McDonald’s 750,000 person workforce. Economics21 director Diana Furchtgott-Roth entered the workforce scooping ice cream at Baskin Robbins at about $3 an hour. She never intended to have a career in ice cream…

Ninety-seven percent of American workers make more than minimum wage, not out of the kindness of employers’ hearts but because this is the only way that employers can retain employees. Low-skill workers need jobs, wages, and work experience too, and if the minimum wage rises, these people will be priced out of a job.

So only about 3% of all workers at any one time make the minimum wage.  And the 3% from 10 years ago are most likely included in the 97% of workers today.  Because minimum wage jobs are entry-level jobs.  And what makes them so valuable is their low pay.  For these workers gain some skills and work experience.  And then get the hell out and join the 97%.  And go on to do great things.  Even become CEOs and directors.  Which they never would have done had they stayed at those minimum wage jobs.  Which they might have had if the minimum wage was a more comfortable living wage.

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Women and Men in the Exact Same Jobs are earning the Exact Same Income

Posted by PITHOCRATES - April 13th, 2014

Week in Review

The Democrats are running out of ways to buy votes.  Which they desperately need as more people suffer the ravages of Obamacare.  Who will be entering the voting booth angry this fall.  Looking for someone to blame for taking away the health insurance and doctors they liked and wanted to keep.  And being that Obamacare was passed on purely partisan lines (no Republicans voted for it) the Democrats are sweating bullets as the midterm elections approach.  So they turn to an oldie but goldie.  The pay gap lie (see What pay gap? Young women out-earn men in cities, GOP pundit claims posted 4/8/2014 on PolitiFact).

We watched the debate play out between conservative pundit Sabrina Schaeffer and liberal pundit Elizabeth Plank on MSNBC’s The Reid Report, and again later between former White House adviser Anita Dunn and conservative pundit Genevieve Wood on CNN’s The Lead with Jake Tapper.

“If you compare women to men in the same job with similar background, similar experiences that they bring to the table, the wage gap all but disappears,” Wood said. “Women have made great strides. Instead of celebrating that, this is a political year, the White House wants to portray this war on women…”

PolitiFact has given you the nuts and bolts about the 77 cents statistic — you can read the two most important works in this area here and here. Basically, there is a wage gap, but it tends to disappear when you compare women and men in the exact same jobs who have the same levels of experience and education.

Well, there it is.  Equal pay for equal work.  When men and women have the same education, experience and skills doing the same job there is no pay gap.  Case closed.  In fact, single women without children are actually earning more than single men.  Which is the key to this argument.  For a woman’s earnings fall with interruptions in her career as she takes time off to have children.  Or works reduced hours to care for her children.  This is where the pay gap comes in.  When you compare apples and oranges.  Comparing women who take time off or cut back their working hours or take lower paying jobs that allow her to spend more time with her children to men who don’t.  Because they’re single.  Or are married and have a wife who takes time off to spend more time with their children.

In fact, women are making great strides.  At the expense of men (see Is the Gender Pay Gap Closing or Has Progress Stalled? by Josh Zumbrun posted 4/11/2014 on The Wall Street Journal).

“There’s no question that one of the things that ‘77 cents’ doesn’t emphasize is that there’s been enormous gains,” said Harvard University economist Claudia Goldin.

Looking at the data above shows three clear trends that have emerged since the 1970s:

1) The spread between the sexes narrowed between 1970 and 2000. It has made little progress since.

2) Men have made no income gains in over four decades. Adjusted for inflation, men earn less today than they did in 1972.

3) Women continued to make gains until the recession began. Whatever forces slowed the income growth of men from 1970 to 2000 did not halt the income growth of women.

Simple economics.  Supply and demand.  Men were making more and more every year.  Until the Sexual Revolution.  When women began to flood the labor market.  With more labor available the cost of labor fell.  So as women gained education and experience the supply of educated and experienced workers grew.  Allowing employers to pay less for these now more plentiful educated and experienced workers.  Which is why as women enjoyed income gains men saw their income decline when adjusted for inflation.  Simple economics.  Supply and demand.

A long time ago in high school chemistry I remember my lab partner did not complete a homework assignment that was part 1 of a 2-part grade.  There was a homework part.  And a lab part.  Being a nice person I asked the teacher if we could share the grade on the homework part (which I had received an ‘A’ on.  Or a 4.0).  The teacher was more than generous.  He said, “Sure.  A 4.0 divided by 2 equals a 2.0 for each.”  Or, a ‘C’ for each.  Suffice it to say my lab partner did not get a 2.0 on the homework that went undone.

This is why men are earning less.  Because women have entered the workforce.  The revenue businesses use to pay their employees didn’t increase like the number of educated and experienced workers did.  So the amount of available revenue for pay and benefits was shared by more people.  Each getting less than a man did before the Sexual Revolution (when adjusted for inflation).  So instead of a single paycheck supporting a family these days it now takes two paychecks.  Because men are making less today since women have lowered the price of labor.  By increasing the supply of labor.  Not because they are paid less.  But because there are so many workers for so few jobs that businesses don’t have to pay as much as they once did to hire people.  Which is more to blame for pressure on wages than any pay gap.

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Chrysler turns down Government Loan for Guarantee to keep Minivans in Windsor

Posted by PITHOCRATES - March 8th, 2014

Week in Review

Cities and governments have long loved big industry.  Unions, too.  Because they’re big.  And are difficult to move. Such as an automobile assembly plant.  They take a lot of real estate.  Require a lot of specialized production and assembly equipment.  And a lot of infrastructure to support them.  Making them very difficult to move.  But not impossible (see Chrysler spurns government money, Windsor to build minivans posted 3/4/2014 on CBC News Windsor).

Chrysler will continue to build its popular minivan in Windsor, Ont., and has withdrawn all requests for government financial assistance in relation to the redevelopment of its assembly plants in Windsor and Brampton…

At the Detroit auto show seven weeks ago, Chrysler CEO Sergio Marchionne said that changes at the Windsor plant alone would cost at least $2 billion, and that Chrysler needed government help to finance the project.

Chrysler said in a media release Tuesday it will now “fund out of its own resources whatever capital requirements the Canadian operations require.”

Industry Minister James Moore said the government’s commitment to the auto industry is strong and he was surprised by Chrysler’s decision.

Essex Conservative MP Jeff Watson, whose riding is just south of Windsor, said he believed talks were going well.

“We were prepared to invest in exchange for guarantees for Canadian production and a Canadian supply chain,” Watson said.

Money from the government doesn’t come without strings.  And the string here was a guarantee that Chrysler wouldn’t leave.  No matter how costly the government or union contracts made it to stay in Windsor.  Costs that Chrysler has to recover in the sales price of their cars.  Which can’t be so high as to price them out of the market.  So Chrysler chose to spend their own money.  So they didn’t get stuck in an adverse economic situation when trying to compete in a global market.

“It is clear to us that our projects are now being used as a political football, a process that, in our view, apart from being unnecessary and ill-advised, will ultimately not be to the benefit of Chrysler,” the company said in a news release.

“As a result, Chrysler will deal in an unfettered fashion with its strategic alternatives regarding product development and allocation, and will fund out of its own resources whatever capital requirements the Canadian operations require.”

The government wanted what was best for them.  Economic activity they could tax.  While Chrysler wanted what was best for them.  Being able to sell cars at market prices.  And leaving their options open in the future.  Should it become too costly to continue to build cars in Canada.  Due to the cost of labor.  Or new regulatory policies.  Or higher taxes to fund a welfare state struggling under the costs of an aging population.  Governments are desperate for new tax revenue.  And will make almost any promise to get it.  Making long-term deals with governments risky.

According to the Ontario government, the auto sector employs 94,000 Ontarians, and supports as many as 500,000 families through indirect jobs…

Unifor Local 444 president Dino Chiodo, who represents hourly employees in Windsor, said he wasn’t completely surprised by Marchionne’s announcement…

Chiodo said Tuesday’s announcement is short of the $2-billion retooling and flexible manufacturing line employees were looking for in Windsor…

Chiodo said a $2.3-billion investment would secure three generations of minivans, which could secure jobs for decades…

Marchionne also wants union concessions.

Yes, they love the jobs these corporations create.  And all that economic activity those jobs create.  Economic activity they can’t create.  But they still hate corporations.  That’s why they tax them.  Regulate them.  Call them greedy.  Exploiters of labor.  And that the only way they can get them to do something decent is by making deals with them that favor them and not these evil corporations.  But sometimes these evil corporations don’t enter agreements that may harm them in the long run.  And when they do governments and unions panic.  As they fear they may have let a cash piñata slip through their fingers.  Which is a problem for them.  For they can’t create a single job those evil corporations can.

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Wal-Mart is the new General Motors for the Middle Class

Posted by PITHOCRATES - February 22nd, 2014

Week in Review

The left hates Wal-Mart.  Because they are nonunion.  And their low prices make it difficult for small mom & pop shops to stay in business charging their customers higher prices.  But being nonunion lets them hire more people.  And their low prices allow people to buy more with their paychecks.  Good things.  Yet the left hates Wal-Mart.  Because they would rather have union jobs even if it means fewer jobs.  And higher prices.  Despite Wal-Mart being the best thing for the middle class since General Motors (see Walmart and the middle class, sinking together by Rick Newman posted 2/21/2014 on Yahoo! Finance).

It was once General Motors (GM) whose fortunes reflected those of the middle-class Americans who bought its products. Now, that bellwether Goliath is Walmart (WMT)…

A chronically weak job market is pinching lower-income consumers — some of whom can’t even afford to shop at Walmart anymore.

The digital revolution has left Walmart at a disadvantage against etailers such as Amazon (AMZN), which has 7 times’ Walmart’s online revenue, and a much smaller physical footprint to manage.

With Walmart tied so closely to the fortunes lower-middle-class Americans, it’s no exaggeration to say that, as goes Walmart, so goes America. And vice versa…

A century ago, Henry Ford famously doubled the pay of his workers — to $5 per day — to reduce turnover and make his production lines more efficient. That move had the added benefit of raising living standards for Ford workers and helping establish the modern middle class.

Even though Walmart is the nation’s largest employer — with 1.3 million U.S. workers — it seems highly unlikely it could achieve anything similar to what Henry Ford did. Global competition gives retailers little room to raise costs without giving away pricing advantages. And fading demand for lesser-skilled workers lacking a college degree leaves few companies with a real incentive to raise wages, aside from earning a bit of public goodwill. Before Henry Ford doubled wages, his workers often left for other blue-collar jobs in a booming industrial economy. Most Walmart workers lack such options.

Amazon is nonunion, too.  But Amazon founder, Jeff Bezos, donated $2.5 million to support gay marriage in Washington State.  Donates primarily to Democrat candidates.  And supports an Internet sales tax (see What Are Jeff Bezos’s Political Leanings, and How Might They Shape the Washington Post? by David A. Graham, The Atlantic, posted 8/5/2013 on the National Journal).  So there are things the left likes about Amazon.  But they only have about 100,000 employees to Wal-Mart’s 2.2 million.  Which is why the left has an all out assault on Wal-Mart.  Because they want to unionize those 2.2 million.  For 2.2 million people would provide a lot of union dues.

Unionization or a higher minimum wage does not build a strong middle class.  A strong economy does.  That’s what helped Henry Ford raise his wages.  To keep his best workers from quitting so they could take higher paying jobs elsewhere.  Which is how people earn more money.  When an economy is so robust that there are more jobs than people to fill them.  Requiring employers to pay more to attract workers.  Not by forcing employers to pay more.  Especially during a weak economy.  When a business’ margins couldn’t be thinner.  Leaving them unable to raise wages without cutting workers.  Which the left will be glad to see.  Lost jobs.  As long as those remaining are union jobs.

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Canadian Liberals don’t Like Wal-Mart Either

Posted by PITHOCRATES - February 15th, 2014

Week in Review

People just don’t hate Wal-Mart in the United States.  The Canadians don’t like them either.  Or, at least, some Canadians (see Developer backs away from plan to put Walmart in Kensington Market by BRUCE LAREGINA AND TARA PERKINS posted 2/13/2014 on The Globe and Mail).

Kensington Market appears to have won the war against Walmart.

The latest pitch to the city from RioCan, the real-estate company developing a site near Bathurst and Nassau streets, no longer includes a big-box Walmart and would shrink the project’s retail area…

“We pushed back hard on this,” said Mr. Layton, who has advocated against Walmart for nearly two and a half years. “The pressure put on Walmart and RioCan from our community backed them off from putting it in our area…”

“As a resident of Kensington Market for my entire life, it looks like a wonderful compromise,” she said. “They were potentially a threat for the businesses in not only Kensington, but in Little Italy and Chinatown as well.

Social democracies everywhere decry capitalism.  And businesses.  Because all they care about are profits.  Which they amass by gouging people with high prices.  This is unfair. And cruel.  People deserve low prices.  Enter government to fetter unfettered capitalism.  To make it fair.  And in the case here that means making sure the local businesses can continue to sell at higher prices.

A business making a profit with high prices is a bad thing.  Unless a Wal-Mart threatens to come in and offer a greater variety of goods at lower prices.  Which will benefit the people.  By proving jobs with better benefits than most Mom and Pop shops can provide.  And allowing people’s paychecks to go farther thanks to those low prices.  But they can’t have that in Kensington Market.  Or any big Democrat U.S. city.  Because Wal-Mart does these wonderful things with a nonunion workforce.  And that’s something liberals just can’t have.  Even if it means higher prices for the people.

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Henry Ford built a Strong Middle Class with Nonunion Labor

Posted by PITHOCRATES - February 9th, 2014

Week in Review

President Obama’s new message is the horror of income inequality.  As his friends on Wall Street and in Hollywood make so much more money than the ‘folks’ do.  Of course, if it weren’t for his abysmal economic policies the ‘folks’ would be able to get a better-paying job.  Since he’s been president his policies have destroyed some 11,301,000 jobs (see The BLS Employment Situation Summary for December 2013 posted 1/13/2014 on PITHOCRATES).  The Affordable Care Act, new taxation, costly regulatory policies and his support for union labor all help to kill jobs.  Forcing a lot of people to work a couple of low-paying part-time jobs to pay the bills.  While his friends on Wall Street and in Hollywood have never been richer.

The economy wouldn’t as bad as it is if President Obama didn’t attack business so much.  And, instead, embraced it.  Like Henry Ford (see The Internet Is the Greatest Legal Facilitator of Inequality in Human History by Bill Davidow posted 1/28/2014 on The Atlantic).

In the past, the most efficient businesses created lots of middle class jobs. In 1914, Henry Ford shocked the industrial world by doubling the pay of assembly line workers to $5 a day. Ford wasn’t merely being generous. He helped to create the middle class, by reasoning that a higher paid workforce would be able them to buy more cars and thus would grow his business.

Yes, Henry Ford did want to pay people enough so they could afford to buy his cars.  But this did something else.  It attracted the best workers to his company.  Because of the incentive of the higher pay.  And if they were lucky enough to have gotten hired in they busted their butts so they could keep those high-paying jobs.  It was a meritocracy.  If a worker wasn’t performing they got rid of that worker.  And offered that job to another person willing to bust their butt to keep that job.

Of course, the unions changed all of that.  The Keynesians will point to Ford to justify their consumption policies (putting more money into consumers’ pockets as the be-all and end-all of their economic policies).  And NOT on how attracting the best workers with the best pay helped make Ford the most efficient.  Allowing Ford to produce cars at prices working people could afford.  Once the unions came in they decreased efficiencies.  Slowed down those assembly lines.  And raised the cost of cars.  So only unionized working people could afford them.  While most other working people had to settle on used cars.  Unless they had a relative that worked for one of the automotive companies that could give them a car at an automotive worker’s discounted price.

Surprisingly, the much-vilified Walmart probably does more to help middle class families raise their median income than the more productive Amazon. Walmart hires about one employee for every $200,000 in sales, which translates to roughly three times more jobs per dollar of sales than Amazon.

Why do some vilify Wal-Mart?  Because like Henry Ford was in the beginning they are nonunion.  Helping them not only to hire the best workers but to provide goods at a lower price so those not in a union can afford to buy them.  So Wal-Mart helps middle class families in two ways.  They help to raise the median family income.  And they allow that median family income go further.  Perhaps the greatest weapon in the arsenal to fight income inequality.  As they help those not in privileged jobs (such as a UAW job or a government job) to live as well as someone in those privileged jobs.

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The McDonald’s Franchise Fee keeps People returning to McDonald’s

Posted by PITHOCRATES - January 26th, 2014

Week in Review

Minimum wage workers are trying to raise the wage in fast-food restaurants.  Like McDonald’s.  They say it’s only fair as the company makes billions a year.  And can afford higher wages for their workers.  But most McDonald’s are independent franchises.  Operated by a small business owner on very thin margins.  For a large portion of their earnings go to the corporate office in franchise fees.  Which does all the work that allows a franchise owner to open for business and have a thriving business from day one.  Because of all they do with those franchise fees (see McDonald’s Says Its Restaurants Got Too Complicated by Julie Jargon posted 1/24/2014 on Yahoo! Finance).

McDonald’s executives say they have learned from their mistakes of the past year and are moving to correct them. The company rolled out numerous menu items in quick succession, creating a bottleneck in the kitchens. They also rolled out products that were too expensive for many consumers, including chicken wings that were priced far above competitors’ offerings, leaving the chain with approximately 10 million pounds of unsold wings, according to a person familiar with the matter…

The chain is revamping its kitchens to include expanded prep tables to give employees more space to assemble food. It also plans to add more employees at peak hours and during weekends.

Mr. Thompson said the marketing needs to reflect efforts to improve its menu. McDonald’s on Wednesday announced the appointment of Deborah Wahl, formerly chief marketing officer of home builder PulteGroup Inc., to be its new chief marketing officer for McDonald’s USA…

For 2014, McDonald’s is budgeting for $3 billion in capital expenditures, which will cover up to 1,600 new restaurant openings and the refurbishing of more than 1,000 existing locations.

A small business owner doesn’t have the time or resources to develop new menu items to attract more customers to their stores.  Pay for costly mistakes.  Or spend billions each year to build new stores and renovate existing ones.  So that wherever you are in the world when you walk into a McDonald’s you are home.  In familiar territory.  With the same delicious food you enjoyed back at home.  When you weren’t homesick in a strange world.  This is what corporate does with that franchise fee.  It makes the McDonald’s experience what it is.  Not the minimum wage workers.  They help.  As does the franchise owner.  But it’s those franchise fees pouring into corporate that get reinvested into McDonald’s that keeps us wanting to return for the comfiest of comfort foods.  The food of our childhood.

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A ‘Living’ Wage would probably push Quiznos into Bankruptcy Court

Posted by PITHOCRATES - December 7th, 2013

Week in Review

Minimum wage workers just picketed for a ‘living’ wage.  Wanting $15/ hour.  About twice what many are making now.  For they believe that the fast food restaurants they work at are getting rich off of their unskilled labor.  And they want a piece of the profits they’re making.  And they’ll cite the profits of, say, McDonald’s and say they can afford to pay their workers more.  But the thing is, most of those McDonald’s stores are independent franchises.  And the fact that McDonald’s may be making the big bucks it doesn’t mean their franchisees are.

Owning a franchise is a way to own a restaurant without having to spend money on marketing.  And you don’t have to create a menu.  In fact, when you buy a franchise it pretty much comes with an operating manual.  Something most other restaurants don’t come with.  Which is why restaurants are the number one business to fail.  Because running a restaurant is hard.  Even a franchise (see Crisis Quickens at Quiznos by Julie Jargon, The Wall Street Journal, posted 12/6/2013 on Yahoo! Finance).

The once-booming sandwich chain Quiznos is stumbling two years into a major turnaround effort, prompting the company to seek concessions from creditors owed nearly $600 million.

The Denver-based chain, known formally as QIP Holder LLC, has struggled with store closures and tension with franchisees. It recently missed a payment on a loan, and has been negotiating to restructure some or all of its debt load with creditors, who have hired bankers and lawyers, people familiar with the matter said…

Quiznos…shrank to about 3,000 stores world-wide two years ago, and to around 2,100 today, including roughly 1,500 stores in the U.S., people familiar with the matter said. Hundreds of the U.S. stores are underperforming and could close in the next year, some of these people said…

Franchisees long have complained that Quiznos requires them to buy food and other supplies from a Quiznos subsidiary, which they allege charges more than what they would pay to purchase those goods themselves.

To address franchisees’ concerns, current management decreased costs for food and supplies this summer, a person close to the company said. Quiznos reviews food and supply purchases annually to compare market prices, and shares results with franchisees, this person added.

Current and former franchisees said high costs ate into stores’ profitability, causing many to close. With fewer stores contributing to an advertising fund, the chain had fewer resources to promote new products, hurting sales, which resulted in more store closures, they said.

“It’s a vicious cycle,” said Brian Peticolas, who owns a Quiznos in Alton, Ill. “I almost closed my store five months ago, but I didn’t have any other prospects so I kept the doors open.”

Mr. Peticolas said his store averages $5,000 a week in sales, down from $7,000 a week three years ago. He estimates the restaurant is losing up to $300 a week.

Owning a franchise is a lot easier than trying to open and run your own restaurant.  Because it comes with the menu, the restaurant layout, a list of the equipment you’ll need, an ‘operating manual’ that tells you everything you need to do, etc.  New items are researched and developed.  Then marketed.  And everything you need to sell is shipped to your store.  But this comes at a price.  The franchise fee.  And in the case of Quiznos, owning a costly supply chain.

Pizzerias and sub shops are some of the most competitive businesses.  Most are forced to sell ‘a low price’ because of the great competition.  But when you lower your price you hurt your ability to introduce and market new items.  To get an advantage over your competition.  But if you raise your franchise fee or your food/supply costs to your franchisees you will make it impossible for them to operate at a profit.  Causing store closures.  Which makes it even harder to introduce and market new items.  As the one store owner said, it is a vicious cycle.  That usually ends in bankruptcy court.  Or in an out of court settlement with your creditors.

There is only one thing that can make all of this worse.  Higher wages.  Which will only accelerate franchise closings.  And the trip to bankruptcy court.  Of course the people picketing won’t believe this.  Until the store they work at closes.  Which will most likely happen if they raise the minimum wage to a ‘living’ wage.  Especially at these Quiznos franchises.  Which are struggling to stay out of bankruptcy court.  And will probably lose that struggle.  Even if the minimum wage isn’t raised to a ‘living’ wage.

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California raises their Minimum Wage, condemning some to Remain in Dead-End Entry-Level Jobs Forever

Posted by PITHOCRATES - September 28th, 2013

Week in Review

Those who don’t understand economics always want to raise the minimum wage.  Because they think it will help unskilled workers.  But it actually hurts unskilled workers.  For a couple of reasons.  It will increase the cost of business.  Especially for small business owners who survive on thin margins.  If they have a few minimum wage workers an increase in the minimum wage may force the owner to lay off one of them.  Or more.  It is often that or working at a loss.

Another way minimum wage workers get hurt by a higher minimum wage is that it will keep them in a minimum wage job.  Where they never will earn much.  Causing them to struggle throughout their life.  You see, minimum wage jobs are entry level jobs.  Unskilled jobs for the unskilled.  So they can get some working skills when they have little to offer an employer.  Which is why historically high school kids and college students work these jobs.  Gaining useful job skills to apply to a future career.  Where they will earn a lot more.  Allowing them to raise a family.  It’s why people go to college.  To earn more money.  As they didn’t expect to get a ‘living wage’ without this higher education.

So raising the minimum wage is not in the best interest for minimum wage workers.  Unless they want to remain in dead-end jobs for the rest of their life.  After all, these jobs are often referred to contemptuously as ‘hamburger-flipper jobs’.  But state governments are always willing to keep people in these ‘hamburger-flipper jobs’.  Why?  For the votes.  Which is why California is raising their minimum wage (see California raises minimum wage to $10 by Melanie Hicken posted 9/25/2013 on CNNMoney).

The state’s minimum wage will gradually rise from $8 to $10, under the law signed by Governor Jerry Brown Wednesday morning. The hourly rate will increase to $9 on July 1, 2014 and to $10 on Jan. 1, 2016…

More than 90% of minimum-wage workers in the state are over the age of 20, while nearly 2.4 million of the state’s children live in a household with a parent who earns minimum wage, according to the statement. The pay bump would boost a full-time worker’s income by about $4,000 to around $20,000 a year.

The next time you go to a McDonald’s count the people working there.  There are a lot people.  Sometimes 8 or more.  Let’s look at that additional $4,000 in a worker’s income.  Which if you add taxes and other employee expenses let’s say it costs the employer $6,000 per worker.  If there are 5 employees that’s an additional $30,000.  Most McDonald’s are franchises.  Basically small business for one single small business owner who pays a whopping franchise fee.  For the privilege of having to do no marketing to get people to walk through their door.

Let’s assume an owner clears $100,000 in profits for his or her own salary.  And works 80 hours a week to earn that.  So his or her spouse can be a stay-at-home parent for their children.  Who bought the business so the two of them didn’t have to work.  Each earning $50,000 to make the house payment in a nice neighborhood with an excellent school system.  With the raise in the minimum wage this business owner will take a $30,000 pay cut.  Making it difficult to pay his or her bills.  Which will force them to lay off some workers and work more hours.  Or close the restaurant.  So they can get a job.  The spouse, too.  So they can afford to stay in the house they worked so hard to afford.  And keep their kids in the school they worked so hard to put them in.  Turning their kids over to daycare as they become working, part-time parents.

Business owners are not all getting rich.  More businesses fail than succeed.  Some make a lot of money.  Some lose a lot of money.  While every month is a struggle to meet their cash-flow needs.  And increases in the minimum wage won’t make this any easier.  It will just increase their costs.  Making it harder for them to stay in business.  And if they go out of business then that higher minimum-wage won’t help those minimum-wage workers.

Of course the question that just begs to be asked here is this.  Why is it that so many families have to rely on entry-level jobs to raise their families?  Is it because the Californian educational system failed them and they’re unable to go on to college?  Is it because the taxes and regulatory costs in California are so onerous that it is hindering job creation in better paying industries?  Or is it because people are so sexually active in high school that they’re having babies before they have an established career?  Or is it because they choose to remain in these hamburger-flipper jobs because the minimum wage plus a generous welfare state is enough to make life comfortable?  This is the more important problem to resolve.  What is putting these people in these dead-end hamburger-flipper jobs to begin with?  For these people would be far better off advancing out of these entry-level jobs than staying in them forever.

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